Malaysian palm oil futures, which ended lower on Monday, saw their sharpest decline in a week at the close of trade , on the back of weaker export demand and a fall in crude oil prices. Palm oil prices are impacted by movements in the energy market, as it is used as feedstock to make biodiesel. Oil prices fell on Monday after China threatened duties on American crude imports and ahead of an OPEC meeting, though US Brent crude recovered its losses to gain later in the day. India last week raised import taxes on crude and refined soyoil, sunflower oil and canola oil to the highest level in over a decade in a bid to support local farmers. The hike is expected to increase palm oil demand in the coming months by making it more competitive and level playing field in the Indian market. Malaysian shipments of the edible oil in the first half of June declined 7.2 percent versus the corresponding period in May, inspection company AmSpec Agri Malaysia said on Monday. Cargo surveyor Societe Generale de Surveillance reported on Monday evening that Malaysian palm oil exports declined 9.6 percent in the same duration.

CPO active month September contract continues to keep edging lower. Prices have hit the important near-term support at 2,305-10 MYR/tonne levels, but it still does not show any major signs of support or reversal yet. where a strong trend line support kicks in. We can expect prices to retrace higher towards 2,360 or even higher towards 2,400-20 , which could now cap upside attempts. As mentioned earlier, it is too early to change the medium to long term view to bullish again though prices went close to 2,500 . Fall below 2,300 could see further declines to 2,185-2,255 too, from where a strong rebound or a possible bottom is likely subsequently. Favoured view in the bigger picture expects that while upticks to 2,380 or even higher to 2,420 caps, we can expect more downside breaking 2,310 triggering the next sharp decline lower. As we have been maintaining, we are still of the view that that the underlying bigger trend continuing to be bearish, any upticks or unexpected rallies higher could be short-lived and prices could decline subsequently. However, a close above 2,510 could revive bullish hopes for the short-term or even higher, but subsequently we still favour a decline. For now we favour resistances around 2,395-2,400 range to cap for a retest of highs around 2,310 or even lower to 2,250 in the coming sessions.

We will now reassess the wave counts, as prices have crossed over above 2,370-2,400 . A possible new impulse looks to have started again. One of our targets at 1,850 was met. The rally from there looks very impressive. As mentioned earlier, we expected prices to push higher towards 2,645 initially and then correct lower in a corrective pattern towards 2,425 or even lower to 2,225 , and then subsequently rise towards a medium to long-term target at 3,600 , which could bring this current impulse to an end. The medium to long-term bullish expectations have been dented on a fall below 2,655 . This makes us believe that the highs at 3,105 was an end off an impulse and the targets are near 2,200 or even lower where the equality target is expected to be tested. Only a close above 2,640 could alter the wave counts again, which is not our favoured scenario now. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are have gone below the zero line of the indicator hinting at bearish reversal. Only a crossover again above the zero line could hint at a bullish reversal.

Therefore, look for palm oil futures to test the support levels.

Supports are at MYR, 2,310, 2,2275 & 2,245 Resistances are at MYR 2,360, 2,400 & 2,450.

The writeris the Director of Commtrendz Research. There is risk of loss in trading.

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